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Group 1 Auto Misses Estimates

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Group 1 Automotive Inc. (GPI - Free Report) posted a 5.3% rise in earnings per share to 99 cents in the fourth quarter of 2012 from 94 cents in the prior-year quarter but missed the Zacks Consensus Estimate by 21 cents. Net income grew 9.4% to $24.0 million from $22.0 million in the fourth quarter of 2011.

Revenues increased 19.3% to $1.9 billion, driven by strong retail new vehicle and used vehicle unit sales. Revenues from new vehicle sales escalated 22.3% to $1.2 billion on a 20.8% increase in unit sales to 33,164 vehicles. Revenues from retailed used vehicles boosted 16.6% to $423.3 million on a 13.5% increase in unit sales to 20,180 vehicles.

Revenues from wholesaled used vehicles went up 17.3% to $69.7 million. Used vehicles wholesaled increased 19.6% to 10,469 units. Revenues from parts and service business scaled up 8.3% to $221.7 million. The company’s finance and insurance business witnessed a 26.7% rise in revenues to $67.7 million.

Gross profit increased 14.0% to $280.3 million in the quarter due to higher revenues. New vehicle gross profit rose 12.4% to $64.2 million but gross profit per unit sold dipped 7% to $1,937. Retail used vehicle gross profit swelled 13.9% to $33.0 million while gross profit per unit sold rose marginally by 0.3% to $1,637. Wholesale used vehicles gross profit plunged 50.8% to $60 thousand due to higher cost of sales while gross profit per unit sold fell 57.1% to only $6.

Parts and service gross profit went up 8.6% to $115.2 million on higher revenues. Finance and insurance gross profit rose 26.7% to $67.7 million while gross profit per unit increased 7.4% to an all-time record $1,270, as penetration rates improved in both finance and vehicle service contracts.

Operating income declined 7.8% to $45.9 million due to higher selling, general and administrative expenses and asset impairments. Consequently, adjusted operating margin went down to 2.9% from 3.2% in the last year’s quarter.

For full year 2012, EPS surged 25.1% to $4.53 from $3.62 in 2011 while net income increased 25.8% to $108.2 million from $86.0 million in 2011. Revenues went up 23.0% to $7.5 billion.

Group 1 Automotive had cash and cash equivalents of $4.7 million as of Dec 31, 2012, significantly down from $14.9 million as of Dec 31, 2011. Total debt amounted to $263.6 million as of Dec 31, 2012, reflecting a debt-to-capitalization ratio of 23.5%, compared with $198.9 million and a debt-to-capitalization ratio of 19.8% as of Dec 31, 2011. In 2012, the company had cash flow from operating activities of $159.2 million, up 4.6% from $152.3 million in the prior year.

Headquartered in Memorial City of Houston, Texas, Group 1 Automotive was founded in 1997. The company is one of the largest automotive retailers in U.S., which provides 31 automotive brands. It has 120 automotive dealerships, 156 franchises and 31 collision centers in the U.S. and the U.K.

Currently, Group 1 Auto retains a Zacks #2 Rank, which translates into a short-term (1 to 3 months) Buy rating. Other stocks from the same industry that we would like to prefer include Lithia Motors (LAD - Free Report) , Penske Automotive Group (PAG - Free Report) and Asbury Automotive Group (ABG - Free Report) . They carry a Zacks Rank #2 (Buy).

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